I would have liked to be a fly on the wall in D.C. today when the Federal Reserve Board hosted a forum to talk about problems in the credit card industry. It was a closed-door meeting featuring “card issuers and processors, consumer advocates, counseling agencies and other regulators,” according to Fed Gov. Randall S. Kroszner.
Were there fireworks? Did they agree to disagree on the unfairness of interest rate hikes for customers with good payment records? Was there consensus on the need for clear disclosure of credit card terms? Forum participants were sworn to secrecy.
Unfair trade practices?
According to a statement released by the Fed, the biggest headline to come out of the meeting was that the Fed plans to push new rules to ward against unfair and deceptive trade practices in the credit card industry. The Fed has the authority under the Federal Trade Commission (FTC) Act to regulate credit card issuers’ practices.
The Fed’s proposed changes to the Truth in Lending Act (Regulation Z) are currently being reviewed by Fed staff and a final draft should be sent to the Board of Governors sometime this year for approval. Reg Z dictates how much information consumers must receive when applying for credit, opening an account and in monthly statements. The rules also govern things like the size of the type in these publications (anyone else straining to read the fine print on the back of their statements?) and how much advance notice must be given to consumers when there are changes in terms on credit card contracts.
Consumer advocates, however, have complained that tougher disclosure rules would do nothing to stop alleged unfair trade practices that have increased in recent years.
If the Fed does indeed finalize new rules this year it may follow closely on the heels of Congress. Numerous bills are circulating in both the U.S. House and Senate to offer, among other stiffer protections, a Credit Cardholders’ Bill of Rights (introduced by Rep. Carolyn B. Maloney).
The Fed’s official statement from today’s forum reads:
“Today’s forum brought together all segments of the credit card market for an insightful discussion of current conditions and emerging issues. The information shared will guide the Federal Reserve’s work to ensure that consumer disclosures are as clear as possible and that credit card users are protected from unfair and deceptive practices. This spring, we will issue proposed rules on unfair and deceptive acts and practices using our authority under the FTC Act. Consumer protection rules under both the FTC Act and the Truth in Lending Act will be finalized this year.”
Kroszner originally announced the Fed would host the forum during a March 11 speech to the American Bankers Association. Fed spokeswoman Susan Stawick issued a statement today saying the Fed would not release names of participants.
Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group (PIRG), confirms that he attended, but was mum on what transpired:
“I was there and agreed it was off the record, so I am not sure what else I can tell you,” Mierzwinski writes in an email. “I will say, we appreciate the Fed doing this and hope they thought it was useful. Although I don’t see any of the bankers there dropping their opposition to the Maloney and other bills!”
Adds Joel Greenberg, chairman of the board of the Association of Independent Consumer Credit Counseling Agencies (AICCCA), who says he attended the four-hour forum: “I’m encouraged by what I saw and what I heard.”
AICCCA is a nationwide group representing 36 nonprofit consumer credit counseling agencies that operate 178 counseling offices in 38 states. In a telephone interview late today, Greenberg says he sensed a “strong interest on the part of the Federal Reserve Board as regards to consumers’ rights.”
He says he gained an appreciation of how complex the reform process ahead may be: “It could take longer than some would like it to take. As an advocate for consumers, we would like to see things taken care of quickly rather than longer.”